Crossing the know-do chasm

This is from the daily POV40IQ email.

For most situations in life we know what to do. Partner with aligned people, be kind, save more and spend less, and only eat one doughnut in the office conference room.
For some situations in life we don’t do what we know to do. We partner with the wrong people, we snap, we spend more on things we don’t want, and let’s not talk about doughnuts.

Jon Stein, like all of us, is human. Though he majored economics at Harvard and studied behavioral science, he still found himself day-trading and making short-term ill-advised decisions. He knew better but didn’t know how to do better.

Years later Stein founded Betterment and spoke on the Long View podcast about how Betterment helps their clients cross the know-do chasm. In short, it’s about information.

  1. Presentation. What colors do people see when they log in? Studies show that people act differently if the same trend line is in red or green.
  2. Relevance. Clients share what they want to do with their Betterment money, “this means we can tell you if you are on-track or not for that goal.” It’s not about how much money but what to do with that money.
  3. Salience. When clients choose to sell, Betterment displays the tax implications and according to Stein, 75% choose not to exit their position.

This is behavioral science at its best. Through testing ideas with real people, Betterment is able to scale thoughtful decision making—and anyone can.

Consider your personal, professional, and communal decisions. What information should you highlight and what should you fade?

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